FINANCIAL SCENE
Disappointment at WTO
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Persisting differences over farm subsidies and market access for industrial goods
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The macro economic environment of the day in many countries is not conducive to a resumption of the Doha round talks.
— FILE PHOTO
FAILED TALKS: Leaders and Heads of States attending the G20 summit on financial markets and the world economy at the National Building Museum in Washington, DC, recently to craft a joint strategy to deal with the crisis.
Going by the track record of the Doha round of trade talks over the past seven years, few were surprised that yet another attempt to complete it — before the end of 2008 — had failed. On December 12, WTO Director General Pascal Lamy announced that he was calling off a meeting of trade ministers scheduled for the middle of the month.
The chequered path of the Doha round trade talks is littered with failures. On many occasions ‘successful conclusions’ had seemed within grasp but eluded at the last minute.
As a rule it has been difficult to evaluate the talks and measure their outcomes. Much of the recent discussions among trade ministers and officials at the WTO Secretariat in Geneva have been in closed rooms and not open to scrutiny by the press or the general public. Statements of trade ministers often reflect their political stances which, for nearly all countries, are by now well known. It is too much to expect a senior trade minister or official state in public that he has shown some ‘flexibility’ in his country’s stated position even if he had done just that.
Politics decides
Positive outcomes in trade negotiations depend as much, if not more, on politics as economics. Politicians who negotiate the deal are unlikely to be around when the benefits of the deal start flowing to their respective countries. More immediately, however, they will face opposition from vested interests back home who, for example, may be exposed to competition for the first time or will receive fewer subsidies as a consequence of trade agreements. Besides, trade talks are usually over arcane procedural and legal issues. The jargon used, to put it mildly, is usually beyond the comprehension of lay people.
Over the years, the outcome of the Doha round seemed to centre on how differences in agriculture and non-agricultural market access (NAMA) could be narrowed down. There are other issues to be sure but these two — agreements on modalities that would specify reduction commitments in agricultural tariffs and subsidies and tariff cuts in industrial products _ have been at the core of all the inconclusive discussions.
A missed opportunity
In July this year, there were chances of a breakthrough in both agriculture and NAMA. The specific item on which the trade talks tripped was the special safeguards mechanism — the tariff levels that developing countries can maintain to shield their farm sector from unexpected surges in imports. The differences between India and the U.S. over that specific issue proved insurmountable. A WTO background paper released after the meeting suggested that there could have been a meeting ground if all the parties had the will and conviction to move forward.
Since then there have been frenetic efforts to preserve whatever gains that were made at the mini-ministerial and move ahead to reach an agreement by end 2008. By the second half of 2008, the global economic situation worsened as the financial sector crisis intensified. Senior officials of the WTO and other international organisations had argued that an agreement on trade — by concluding the Doha round — would act as a stabiliser. That idea received strong support at theG-20 Washington summit in November. Political leaders from the developed countries and a few from the developing ones (including India and China) endorsed the idea.
U.S. initiatives unlikely
The new Obama led U.S. government will in all probability be totally focussed during its first year on tackling the housing led financial crisis. At a time of recession in the U.S. and most other developed countries, politicians are more likely to lend a sympathetic ear to measures that may check cheap imports. Already, powerful groups in the U.S. representing agriculture and manufacturing have signalled their vehement opposition to suggested Doha round compromises in so far as these affect their respective interests.
There will be a new European Commission by autumn while India will have its general elections by May at the latest. So the chances are that political leaders from these two important trading groups will opt for status quo and not push for a change in trade rules that in any case are not possible even in more favourable times.
Bleak revival chances
India and many other developing countries have long complained that the Doha round has lost its development character. The U.S., though a signatory to the Doha agenda in 2001 and other agreements including the Hong Kong Ministerial declaration, had always insisted on a hard bargain; in return for modest cuts in farm subsidies, it had sought unlimited access in India, China, Brazil and South Africa for its major farm products such as soya and cotton as well as certain industrial goods.
Thus, as the deadlock continues, the chances of reviving the talks have begun to fade. The irony is that while a successful conclusion would help the troubled world economy, it is the macro economic environment of the day that hinders an early resumption of talks.
C. R. L. NARASIMHAN
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